Japanese Yen Mixed on $120 Billion Stimulus Package, PMI Readings

The Japanese yen is trading mixed against major currency rivals on Thursday as reports suggest Tokyo is going to spend billions in stimulating the economy. Various purchasing managers’ index (PMI) readings improved last month, helping the yen this week. But bond investments held by citizens abroad fell for the second week in a row, though this was offset by another increase in stock holdings by foreign investors in Tokyo.

The Jibun Bank Composite PMI came in at 49.8 in November, up from 49.1 in the previous month – anything below 50 indicates a contraction. This was slightly lower than the market forecast of 49.9. The Jibun Bank Services PMI posted a reading 50.3 last month, up from 49.7 in October. Analysts had penciled in a reading of 50.4.
According to the Ministry of Finance, foreign bond investment plunged by $4.7 billion in the week ending November 30. This is down from the $1.38 billion decline in the previous week. In the same report, stock investments held by foreigners surged by $3.62 billion, up from $1.2 billion in the previous week. This represents nine consecutive weeks of gains.
The Reuters Tankan poll showed that Japanese manufacturers and the service sector were a bit more optimistic about their business conditions as it edged up from -9 in November to -6 for December.
On Friday, October household spending, foreign exchange reserves, and economic indexes will be released. They are all projected to be disappointing.
This comes shortly after it was reported that the federal government is preparing an economic stimulus package totaling about $120 billion. The purpose of this initiative, which is expected to rise to $230 billion when factoring in private-sector spending, is to support lackluster growth. Initial reports pegged the number at $92 billion. But this is expected to throw a wrench in the government’s plans to curb its debt and rein in higher spending, which were used as justifications for the sales tax hike in September.
An official announcement on the package is expected to happen on Thursday or Friday.
The USD/JPY currency pair dipped 0.07% to 108.79, from an opening of 108.86, at 14:19 GMT on Thursday. The EUR/JPY rose 0.1% to 120.71, from an opening of 120.61.

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